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Based in Lewisville, Texas, Nationstar (NYSE:NSM) is one of the leading residential mortgage services companies in the U.S., with a servicing portfolio of $312 billion. The company offers servicing, origination and real estate services to financial institutions and consumers.

Excellent First Quarter Results and Improved Guidance

On May 7, 2013, Nationstar reported its first quarter 2013 results. Net income for the quarter came it at $62.6 million or $0.70 per share, up from $50.2 million or $0.67 per share in the first quarter 2012.

Pro-forma earnings excluding ramp-up expenses related to the BOA portfolio acquisition were $0.85 per share, substantially ahead of Zacks consensus estimate of $0.69 per share. Revenue for the quarter was up 163% to $431.1 million from $164.1 million in the prior-year quarter. The company delivered an impressive 32% return on equity during the quarter.

The management improved its guidance for FY 2013 to $4.05–$4.75 per share from $3.70–$4.35 per share and for FY 2014 to $6.45–$7.50 per share from $5.60–$6.50 per share.

Nationstar also announced the acquisition of the mortgage origination business of Greenlight Financial Services, a leading direct-to-consumer originator, for up to $75 million in cash.

According the company, the acquisition is expected to close in the second quarter and will be immediately accretive.

Positive Earnings Estimates Revisions

As a result of excellent results and improved management guidance, analysts have been revising their estimates for current quarter and the fiscal year 2013. Zacks consensus estimates for the current quarter and the current year have soared to $1.01 and $4.52 per share, respectively up from $0.89 and $3.97 per share, seven days ago.

The company has delivered positive surprises in each of the last four quarters - with an average surprise of 18.58%.

Solid Industry Outlook

With a Zacks Industry Rank of 8 out of 265, the mortgage servicing industry is expected to outperform significantly in the near-to-mid term. Rising home prices will lead to fewer losses for the delinquent loans that the company services. Further, if the rates start to rise, the life of its servicing assets will get extended, leading to increased cash flows.

The Bottom Line

NSM is a Zacks Rank #1 (Strong Buy) stock. It also has a longer-term Zacks recommendation of “Outperform." Further, a Zacks Industry rank of 8 out of 265 indicates very strong likelihood of continued strength in the short to medium term, compared to other industries.

With a solid growth potential, I believe that this stock will be a nice addition to any portfolio.

NATIONSTAR MTGE (NSM): Free Stock Analysis Report

Source: Bull Of The Day: Nationstar